Election to pull housing market trough forward
Auction clearances hovered well above 50 per cent in a market that economists and property bosses said would enjoy an earlier and higher trough after the federal election result lifted uncertainty about tax policies.
While auction volumes fell by a quarter to 917 in the week to Saturday's federal election, initial figures - based on the 633 results reported - showed clearances at 57 per cent, in line with the previous week's preliminary rate of 58.1 per cent, CoreLogic figures on Sunday showed.
The housing market is heading towards its winter lull and preliminary clearance rates are always lowered - last week's final figure was 54 per cent - but anecdotal signs of strength in recent weeks and the latest figures show the market remains in a no-man's land between weakness and strength.
In such an environment, the election result, promised boost for first home buyers by the coalition government, and further likely rate cuts, could bring an earlier end to the bottom of the cycle, AMP Capital chief economist Shane Oliver said on Sunday.
"If we get an interest rate cut in June or July - which I think we will – than that in combination with support for first home buyers, which I have a sneaking suspicion will morph into a first home buyers’ grant, along with the removal of uncertainty about capital gains tax and negative gearing, all those things could bring forward the timing of the bottom," Dr Oliver said.
While he hadn't altered his projections of a 15 per cent national peak-to-trough housing price decline - and 25 per cent in Sydney and Melbourne - Dr Oliver said he would reconsider them in a couple of weeks, after the first of the two likely rate cuts he expects the Reserve Bank to make.
"The way things are unfolding, we may well end up not being quite as negative and out of the trough of the market earlier," he said.
In Sydney, which had a meagre 270 scheduled auctions for the week, a two-bedroom house in the lower north shore suburb of Lane Cove sold $180,000 above reserve at $1.48 million, Domain reported.
The house at 8 Cumberland Avenue on 536 square metres was bought by first-home buyer moving from the city's western suburbs.
Sydney's rate of 60.7 per cent was well down on last week's preliminary 65.6 per cent, which was subsequently revised down to 50.9 per cent.
"Sydney’s final clearance rate has come in at the high 50 per cent range for the last two weeks, as final collection comes in this week we will see if this was maintained for another week," CoreLogic said.
"The last time Sydney’s clearance rate was in the high 50’s was mid-May last year."
In Melbourne - where buyer's agent David Morrell last week called the bottom of the market - preliminary clearance rate of 62.9 per cent was well up on the previous week's 56.8 per cent.
Competition pushed a two-bedroom townhouse at 1/118 Roseneath Street in inner-northern Clifton Hill over the $951,000 reserve to $1.06 million.
Uncertainties remain in the market, indicated by a clearance rate that held still despite low listings, Dr Oliver said.
"There is still a lot of negatives impacting the market – supply side is a big one, the labour market story will trend less positive going forward," he said.
Rod Fehring, the chief executive of Frasers Property Australia, who earlier this month described a housing market in "peak uncertainty," agreed that the removal of the prospect of negative gearing and capital gains tax changes would likely prompt an earlier bottoming out of the market this year rather than towards the start of next year.
"My guess is you’ll probably see it bottom out through the course of this year," Mr Fehring said.
"There’s a bringing forward of the bottoming out. That’s a positive."
Stockland chief executive Mark Steinert said the lifting of concerns about tax changes would "create the floor in the market, the basing, and certainly is likely to stop it falling further from where it’s been."
It was unclear how long until prices started rising again - as credit controls were still a key issue - but it was a positive thing, Mr Steinert said.
"Investors are one-third of the whole market," he said. "You’ve just re-engaged one-third of demand."